Pound slides on Scottish say on Brexit ruling appeal; Dollar set to end week near 14-yr highs
- Buz Investors Pound slides The British pound was one of the worst performers in Friday’s European Session as it was hit by news that the UK Supreme Court will allow Scottish and Welsh lawyers to attend the Brexit hearing, while the US dollar looks set to enjoy a second week of strong gains.
- Sterling fell sharply today after lawyers representing the Scottish and Welsh governments were invited to have their say in the hearing on whether the High Court’s ruling that the UK government needs to get parliamentary approval before triggering Article 50 should be overturned.
- The pound hit a 2-week low of 1.2301 dollars as investors feared the involvement of Scottish lawyers would make it less likely for the ruling to be overturned given that Scotland voted in favour of remaining in the EU.
Pound slides Markets had initially welcomed the High Court ruling that stipulates MPs must approve the decision to invoke Article 50. However, any potential delay to formally starting the Brexit process is now seen as creating further uncertainty. The Supreme Court is due to give its decision on the appeal early next year.
Economic data was scarce in today’s European session with Eurozone current account and Canadian inflation figures being the only indicators of interest. The Eurozone’s current account surplus narrowed from €29.1 billion in August to €25.3 billion in September. But comments from ECB President Mario Draghi got more attention when he spoke in Frankfurt earlier in the day. Draghi said that although the recovery in the Eurozone is becoming more broad-based, growth is still reliant on accommodative monetary policy.
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The remarks reinforced expectations that the ECB will extend its QE program at its policy meeting next month. The euro meanwhile was steadier in early European trading on Friday before making a fresh 11-month low of 1.0568 dollars in late session.
Inflation numbers out of Canada today were largely in line with expectations in October. Annual CPI accelerated from 1.3% to 1.5% in October as expected. However, the core rate, which the Bank of Canada puts more emphasis on, fell slightly from 1.8% to 1.7%. The Canadian dollar was broadly firmer against other majors but flat against its US counterpart. The US dollar eased away from near 11-month highs set earlier in the day to trade around 1.3525 versus the loonie in late European session.
Other commodity currencies were also mixed as commodity prices came under pressure again from the strong greenback. The Australian dollar slid to a 4½-month low of 0.7329 versus the US dollar. But the New Zealand dollar was more resilient following strong retail sales figures out of New Zealand earlier in the day, and was little changed on the day at 0.7013.
Oil prices reversed mid-session gains to head back down again in late European trading. Growing optimism that OPEC and Russia are coming close to agreeing to a production cut could not offset the effects of the resurgent dollar. WTI oil was last down almost 1% at $45.02 a barrel.
Gold prices moved in similar fashion to crude oil, with the yellow metal falling back towards 5½-month lows to trade at $1207 an ounce.
The US dollar, which had eased to 109.79 yen mid-way though European trading, received a boost from no less than four Fed speakers on Friday. Fed policymakers, James Bullard, Robert Kaplan, Esther George and William Dudley all voiced their support for a rate rise sooner rather than later (although Dudley did not directly make a rate hike call).
Their remarks drove 10-year US treasury yields to a fresh 11-month high of 2.351% in late European trading as investors became more confident that the Fed will tighten policy in December. This helped the dollar move back near 5½-month highs against the yen and was last trading at 110.84 yen – up almost 4% on the week.
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